The 10th Circuit Court of Appeals has upheld a decision of the Office of Chief Administrative Hearing Officer (OCAHO) in Split Rail Fence Company, Inc. v. USA (10th Cir. Dec. 2016). In doing so, it found Split Rail violated the law by retaining 10 employees after having constructive knowledge of their undocumented status.

In 2009, Immigration and Customs Enforcement (ICE) provided a Notice of Inspection (NOI) and a Notice of Suspect Documents (NSD) concerning 32 employees, to Split Rail. The NSD stated the I-9 documentation reviewed by ICE shows certain individuals are not authorized to work in the U.S. and “unless the employees present valid identification and employment eligibility documentation acceptable for completing the Form I-9, other than the documentation previously submitted to you, they are considered by ICE to be unauthorized to work in the United States."

Split Rail videotaped serving the NSD on the 32 employees. At that time, 23 of the 32 employees admitted they were unauthorized to work and Split Rail terminated them. However, nine employees insisted they were authorized to work and Split Rail accepted their verbal statements without requiring new documentation to support these assertions.

Thereafter, Split Rail sought guidance from the Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) on how it should respond to NSD without violating IRCA’s anti-discrimination provision. Although OSC stated it could not provide an advisory opinion, it stated that a NSD “may provide a non-discriminatory reason” to re-verify an employee’s employment eligibility. Despite this guidance, Split Rail declined to request documentation for the nine employees in question. Later, Split Rail asserted their position on re-verification was consistent with OSC’s guidance, which OCAHO and the Court totally disagreed with.

After ICE served Split Rail with a Notice of Intent to Fine (NIF), Split Rail settled the matter. Inexplicably, the settlement only involved substantive paperwork violations, not the continued employment of the nine employees. Apparently, ICE believed Split Rail had terminated all 32 employees.

In June 2011, ICE returned with another NOI. Several months later, ICE issued a new NSD. Since nine of the 10 employees in the NSD were the same as 2009, Split Rail did not take any action because the employees had previously stated they were authorized to work. After ICE issued another NIF, Split Rail’s owner wrote a letter to ICE wherein he stated he “had absolutely no reason to believe... that any of the employees in the 2011 NSD are anything but law abiding residents” of the U.S. He also noted “each appeared authorized to work in the United States because they had bank accounts, houses, and mortgages.” OCAHO and the Court found the owner’s statements were not a substitute for requiring employees in question to provide new documentation to support verification.

The Court found ICE established a prima facie showing of the employee’s unauthorized status with evidence that ICE’s computer search of its records showed employees were suspected to be unauthorized due to false I-9 documentation. Furthermore, evidence of the NSD and the employer’s inaction to re-verify the individual’s work eligibility established prima facie evidence of Split Rail’s constructive knowledge of the employees’ unauthorized status. The Court noted constructive knowledge meant “knowledge which may fairly be inferred through notice of certain facts and circumstances which lead a person, through the exercise of reasonable care, that would indicate that the alien is not authorized to work.” See also 8 C.F.R. § 274a.1.

Split Rail’s defense included testimony from a retired ICE agent that errors may result from USCIS and/or DHS database searches. Additionally, Split Rail relied on the owner’s testimony that the nine employees assured him that they were authorized to work and the employees had bank accounts, homes, mortgages and cars.

Although OCAHO and the Court acknowledged mistakes can be made in NSDs, ICE relied upon computer searches and uncontested investigation reports. Plus, ICE provided an opportunity to employees to present alternative documentation. But, the employees never did so. The Court found Split Rail failed to rebut ICE’s prima facie case. Specifically, Split Rail’s response to the NSD, though its owner’s actions and statements, was inadequate. Thus, the Court agreed Split Rail had constructive knowledge of the employee’s unauthorized status.

Concerning the 10th employee in question, Split Rail accepted a foreign passport with an I-551 stamp authorizing his employment for one year in the completion of the employee’s I-9 form. The Court stated, upon the expiration of the stamp, Split Rail had a duty to reverify the employee’s work status but failed to do so. Split Rail’s argument that the employee was a lawful permanent resident and did not need to re-verified was rejected because the I-551 stamp was only employment authorization for one year. Once Split Rail failed to re-verify the employee after the expiration of his I-551 stamp, the Court found Split Rail was working an unauthorized employee.

This decision is an example of what not to do when an employer receives a NSD. If Split Rail had followed the correct procedure in response to the NSD, it would likely not have penalized over $30,000 for its I-9 violations.